METALS-Copper gives up gains, down on Chinese worries
* Copper stocks in LME warehouses drop further to 311,225 T
* Worries about China markets reopening on Friday
* Growth picks in up in dominant U.S. service sector (Updates with closing prices)
By Harpreet Bhal and Eric Onstad
LONDON, Feb 5 (Reuters) - Copper prices dipped on Wednesday, resuming a downtrend after a brief bounce, as investors worried about weak demand in China and about the adjustment of the Chinese market to a drop in London prices when it reopens on Friday.
Copper rebounded on Tuesday and early on Wednesday from two-month lows, but those gains faded as the session wore on.
Three-month copper on the London Metal Exchange closed down 0.04 percent at $7,038 a tonne, having reached a session high of $7,085.
The metal, used in power and construction, dropped to its lowest level since Dec. 4 at $7,016 in intraday trade on Tuesday, but a late-session rebound helped it avert a 10-session losing streak, which would have been its longest in 37 years.
Prices have fallen 4 percent since January.
Chinese markets have been closed since last Friday for the Lunar New Year celebrations and are due to reopen on Friday.
"We are quite concerned about what happens ... when the Chinese markets reopen and 'catch up' with this week's lower (LME) valuations," analyst Edward Meir at broker INTL FCStone said.
Also recent soft Chinese factory data has prompted caution about the outlook for economic growth and demand for copper.
"Disheartening economic data (from China) and the emerging market crisis are weighing on copper demand," said Naeem Aslam, chief markets analyst at Ava Trade.
Losses in copper were capped, however, as data showing dwindling supplies of copper stocks raised concerns about immediate availability and lent support to prices. The figures showed stocks in LME-registered warehouses were at their lowest level in a year at 311,225 tonnes. MCUSTX-TOTAL
U.S. economic data on Wednesday also provided some support to the market, showing growth picked up in the dominant U.S. service sector in January.
"Looking at the global growth backdrop, things are going to improve (for metals demand) led by the U.S.," said Thomas Lam, chief economist at DMG & Partners Securities in Singapore.
"But despite a pick-up in the G3 of the U.S., China and Japan, it's still a sub-par performance. It (the pick-up) will probably limit the downside, but it's unlikely to add too much to commodity prices in general," he added.
In industry news, Newmont Mining Corp expected normal mining operations to continue at its copper-gold mine in Indonesia for at least the next two months, while it tries to resolve an impasse with the government over copper concentrate exports, Chief Executive Gary Goldberg said.
Aluminium was the strongest performer on the LME, climbing 0.7 percent to close at $1,701 a tonne.
Meir, however, expects the downtrend to resume in aluminium after it touched a 4-1/2 year low of $1,671.25 a tonne on Monday.
"We don't see much that will change the short-term dynamic for aluminum," he said in a note. "We suspect we could see another downward shift this month to (a trading range of) roughly between $1,650-$1,740."
Zinc also gained, ending up 0.9 percent at $1,968 a tonne while lead finished 0.2 percent firmer at $2,097.
Tin and nickel each shed 0.5 percent, closing at $22,075 a tonne and $13,775 respectively.
Three month LME copper
Most active ShFE copper
Three month LME aluminium
Most active ShFE aluminium
Three month LME zinc
Most active ShFE zinc
Three month LME lead
Most active ShFE lead
Three month LME nickel
Three month LME tin (Additional reporting by Melanie Burton in Sydney; Editing by Anthony Barker)